Kenya National Assurance Co Ltd v Kimani & another (Civil Appeal 42 of 1984) [1987] KECA 58 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that an insurer keeping your excess payment after a breach does not mean it waived its right to refuse your claim.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the appellant insurer waived its rights under the policy by accepting and retaining the excess after discovering the insured's breach of condition
- 2.Whether the retention of the excess amounted to a representation giving rise to estoppel
- 3.Whether there is a legal distinction between 'premium' and 'excess' in insurance law
- 4.Whether the High Court had jurisdiction to interfere with the arbitral award for an error of law on its face
Key legal issues
#Whether accepting and retaining the excess after discovery of breach constituted waiver
No waiver; the insurer expressly repudiated liability and had a rational reason (third-party claims) for retaining the excess, so there was no representation or estoppel.
Waiver in this context is estoppel by conduct: the insurer must, with knowledge of the breach, by acts or conduct lead the insured to believe strict rights will not be insisted on, intending the insured to act on that belief to their detriment. Here the insurer notified the insured of repudiation, and the retention of the excess was explicable by its statutory liability to third parties under section 10 of the Motor Vehicles (Third Party Insurance) Act. The insured could not reasonably have believed the policy remained alive.
Distinction between premium and excess
They are conceptually distinct; Chitty's rule on acceptance of premiums after breach does not apply to excess.
Premium is the consideration for the contract, whose payment may keep the contract alive; excess is the first amount payable, the part of the loss not insured, paid as part of performance when the insured demands indemnity. Non-payment of excess does not avoid the contract but merely diminishes the insurer's obligation. The textbook passage relied on by the respondents was therefore inapposite.
Jurisdiction to set aside an arbitral award for error of law on its face
The High Court had jurisdiction because waiver arose incidentally within a general reference, not as a specifically referred question of law.
Following Champsey Bhara and Halsbury's statement of principle, an award may be set aside for an error of law appearing on its face, but not where a specific question of law was submitted to the arbitrator and decided. Rashid Moledina is an exception that should not be extended. Here the reference was in general terms and waiver, a mixed question of fact and law, arose incidentally, so interference was permissible even though the court ultimately found no error of law.
Legal principles established
#- Retention of the excess paid under an insurance policy does not, without more, constitute waiver of the insurer's right to repudiate for breach of condition; waiver requires representation and detrimental reliance.
- Premium and excess are distinct concepts: premium is the consideration for the contract, while excess is the insured's agreed contribution to the loss.
- Where waiver arises incidentally in a general reference to arbitration rather than as a specific question of law referred to the arbitrator, the High Court may set aside the award for an error of law on its face.
Court orders
#- 1.Appeal allowed
- 2.Judgment and decree of the High Court set aside
- 3.Costs of the appeal and below awarded to the appellant
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
First judgment. Held that acceptance and retention of the excess did not constitute waiver or estoppel by representation; Chitty's passage concerns premium not excess; allowed the appeal and set aside the High Court judgment with costs.
It follows from what I have set out that I would allow the appeal, and set aside the judgment and decree of the High Court with costs here and below.p. 4
Wrote the judgment
Concurring judgment. Clarified when courts may interfere with an arbitral award for error of law on its face, distinguishing references of a specific question of law from general references; explained that excess differs from premium. Agreed with the orders proposed by Nyarangi JA.
It follows that these subsidiary matters sufficiently widened the inquiry to prevent the third reference being in reality a specific question of law on waiver.p. 5
Wrote the judgment
Third judgment. Applied the principle of waiver as estoppel by conduct (Lickiss v Milestone), found no representation or detriment, distinguished premium from excess, and concluded the arbitrator was right and the judge erred in setting aside the award.
Accordingly, in my judgment, there was no error of law on the fact of the award and the judge below was not justified in setting it aside.p. 9
- On appeal from
- High Court of Kenya
- Jurisdiction invoked
- Second appeal to the Court of Appeal (specific provision not stated in the judgment)
Relief refused
#Respondents' claim that retention of the excess waived the insurer's right to repudiate
No representation by conduct and no detriment; the insurer had expressly repudiated liability and retained the excess to meet statutory third-party claims
Costs
Appeal allowed with costs here and below (costs of the High Court and of the appeal to the appellant).
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
It follows from what I have set out that I would allow the appeal, and set aside the judgment and decree of the High Court with costs here and below. As Platt and Apaloo JJA agree, it is so ordered.
Accordingly, in my judgment, there was no error of law on the fact of the award and the judge below was not justified in setting it aside. It follows that the appellant is entitled to have that award restored.
The acceptance and retention of the excess does not suggest that the appellants had overlooked the observance of the terms of the policy. There is no evidence that, as a result of the retention of the excess, the respondents were misled into acting to their detriment.
Premium is the consideration that moves from the promisee to the promisor to make the agreement enforceable. In its absence, the agreement will be a nudum pactum both in law and equity.
if a specific question of law is submitted to an arbitrator for his decision and he does decide it, the fact that the decision is erroneous does not make the award bad on its face so as to permit of its being set aside.
Issues in the judgment
#Recurring typographical errors in the judgment, e.g. 'on the fact of the award' for 'face of the award', 'Mary 5, 1923' for 'May 5, 1923', and inconsistent case name spellings ('Rashid Moledina's case', 'Sohan Lan's case').
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kenya National Assurance Co Ltd v Kimani & another (Civil Appeal 42 of 1984) [1987] KECA 58 (KLR)", Case Analysis (1987). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1987/58/eng@1987-11-04
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.